Clearwater Analytics (CWAN) - 2025 Q2 - Quarterly Results

Executive Summary Clearwater Analytics achieved strong Q2 2025 financial growth, exceeding synergy targets and securing major new clients, reflecting robust core business performance and successful platform integration Q2 2025 Performance Highlights Clearwater Analytics reported strong financial performance for Q2 2025, with significant year-over-year growth across key financial metrics, driven by both standalone business success and integration efforts | Metric | Q2 2025 | YoY Growth | Source (Q2 2024) | | :----------------------- | :---------- | :--------- | :----------------- | | Quarterly Revenue | $181.9 Million | 70% | $106.8 Million | | Annualized Recurring Revenue (ARR) | $783.5 Million | 83% | $427.2 Million | | Adjusted EBITDA | $58.3 Million | 74% | $33.4 Million | CEO Commentary CEO Sandeep Sahai highlighted Q2 as very successful, emphasizing the achievement of a $20 million synergy target a full year ahead of schedule and strong client support for their integrated platform strategy. The core business showed robust growth, and the company welcomed significant new clients, including Germany's largest public insurer and a major APAC bank - Achieved $20 million synergy target a full year ahead of schedule[2] - Core business revenue grew 22% in the quarter, with platform gross margin exceeding 80%[2][3] - Welcomed Germany's largest public insurer, Versicherungskammer Group, and secured a significant mandate from one of the largest banks in the world in APAC[2][6] Financial Results Summary The company reported substantial Q2 2025 revenue and Adjusted EBITDA growth, alongside a GAAP net loss, while key metrics like ARR showed robust expansion Second Quarter 2025 Financial Summary The company reported substantial increases in total revenue and Adjusted EBITDA for Q2 2025, alongside a GAAP net loss, while non-GAAP net income saw significant growth. Operating cash flows also increased | Metric | Q2 2025 (GAAP) | Q2 2024 (GAAP) | Change (YoY) | | :-------------------------------- | :------------- | :------------- | :----------- | | Total Revenue | $181.9 million | $106.8 million | +70.4% | | Core Clearwater Business Revenue | $130.6 million | $107.0 million | +22% | | Gross Profit | $118.5 million | $76.9 million | +54.1% | | GAAP Gross Margin | 65.1% | 72.0% | -6.9 pp | | Non-GAAP Gross Profit | $140.8 million | $82.7 million | +70.2% | | Non-GAAP Gross Margin | 77.4% | 77.5% | -0.1 pp | | Net Income/(Loss) | ($24.2 million) | $0.3 million | N/A | | Non-GAAP Net Income | $34.8 million | $26.8 million | +29.7% | | Adjusted EBITDA | $58.3 million | $33.4 million | +74.3% | | Adjusted EBITDA Margin | 32.1% | 31.4% | +0.7 pp | | Operating Cash Flows | $47.1 million | N/A | N/A | | Free Cash Flows | $44.1 million | $42.4 million | +4.0% | | Net Loss Per Basic and Diluted Share | ($0.09) | ($0.00) | N/A | | Non-GAAP Net Income Per Basic Share | $0.13 | $0.12 | +8.3% | | Non-GAAP Net Income Per Diluted Share | $0.12 | $0.10 | +20.0% | | Balance Sheet Item | As of June 30, 2025 | As of June 30, 2024 | | :----------------- | :------------------ | :------------------ | | Cash, cash equivalents, and investments | $71.9 million | N/A | | Total debt, net of debt issuance cost | $878.1 million | N/A | Key Metrics Annualized Recurring Revenue (ARR) demonstrated robust growth, while gross revenue retention slightly decreased and net revenue retention remained stable | Metric | As of June 30, 2025 | As of June 30, 2024 | Change (YoY) | | :-------------------------- | :------------------ | :------------------ | :----------- | | Annualized Recurring Revenue (ARR) | $783.5 million | $427.2 million | +83% | | Gross Revenue Retention Rate | 98% | 99% | -1 pp | | Net Revenue Retention Rate | 110% | 110% | 0 pp | | Core Business Net Revenue Retention | 114% | N/A | N/A | Recent Business Developments Clearwater Analytics expanded its market presence through a strategic partnership with Bloomberg, significant client wins, and notable industry recognition Strategic Partnerships and Client Wins Clearwater Analytics announced a significant strategic partnership with Bloomberg and secured several new marquee clients and expanded relationships with existing ones, demonstrating continued market penetration and platform validation - Released the 2025 Insurance Investment Outsourcing Report (IIOR), showing a record $4.5 trillion in unaffiliated general account insurance AUM, up 24% YoY[6] - Announced a strategic partnership with Bloomberg, integrating Bloomberg AIM with Clearwater to eliminate manual workflows and deliver a seamless front-to-back experience[6] - Secured new clients including Versicherungskammer Group (Germany's largest public insurer), Norli Liv & Pension (Danish pension provider), Pool Re (UK's terrorism reinsurer), and HG Re Ltd. Expanded relationship with long-time client Wayne Cooperative Insurance[6] Industry Recognition The company received notable industry accolades, being recognized among the world's top fintech companies and for its innovative products/services - Recognized by CNBC and Statista, Inc. on CNBC's list of the World's Top Fintech Companies 2025[7] - Awarded the Hong Kong winner of the InsuranceAsia News Country Award for Excellence 2025 in the Most Innovative Product/Service category[7] Financial Guidance The company provided optimistic financial guidance for Q3 and full year 2025, projecting strong revenue growth and consistent Adjusted EBITDA margins Third Quarter 2025 Guidance Clearwater Analytics provided optimistic guidance for the third quarter of 2025, projecting strong revenue growth and stable Adjusted EBITDA margins | Metric | Third Quarter 2025 Guidance | | :---------------------- | :-------------------------- | | Revenue | $203 million to $204 million | | Year-over-Year Growth % | ~75% to 76% | | Adjusted EBITDA | ~$65 million | | Adjusted EBITDA Margin % | ~32% | | Interest Expense | ~$16 million | Full Year 2025 Guidance The company issued consolidated guidance for the full year 2025, forecasting substantial revenue growth and consistent Adjusted EBITDA margins | Metric | Full Year 2025 Guidance | | :----------------------------------------------------------------- | :---------------------- | | Revenue | $726 million to $732 million | | Year-over-Year Growth % | ~61% to 62% | | Adjusted EBITDA | $232 million to $237 million | | Adjusted EBITDA Margin % | ~32% | | Total equity-based compensation expense and related payroll taxes | ~$135 million | | Depreciation and Amortization | ~$86 million | | Interest Expense | ~$48 million | Corporate Information This section provides details on the Q2 2025 conference call, an overview of Clearwater Analytics' platform, and important disclaimers regarding non-GAAP measures and forward-looking statements Conference Call Details Clearwater Analytics scheduled a conference call and webcast to discuss Q2 2025 financial results and provide a business update - Conference call and webcast scheduled for August 6, 2025, at 5:00 p.m. Eastern time[10] - Live webcast and replay available on the Company's investor relations website: investors.clearwateranalytics.com[10][11] About Clearwater Analytics Clearwater Analytics is a leading provider of a comprehensive cloud-native platform for investment management, serving institutional investors globally with real-time data and AI-driven insights - Offers the industry's most comprehensive cloud-native platform for institutional investors across global public and private markets[12] - Platform delivers real-time data and AI-driven insights, integrating portfolio management, trading, accounting, reconciliation, regulatory reporting, performance, compliance, and risk analytics[12] - Supports over $8.8 trillion in assets globally for leading insurers, asset managers, hedge funds, banks, corporations, and governments[12] Use of Non-GAAP Information The press release includes non-GAAP financial measures, which are presented to provide investors with additional insights into the company's operating performance, despite not adhering to standardized GAAP methodologies - Non-GAAP measures (e.g., non-GAAP gross profit, Adjusted EBITDA, non-GAAP net income, free cash flow) are not based on standardized GAAP methodology and may not be comparable to other companies[13][14] - These measures are considered useful for investors to evaluate operating performance when reviewed with GAAP statements, but should not be considered in isolation or as a substitute for GAAP measures[14] - Adjustments to non-GAAP measures exclude impacts of share-based compensation, financing/capital structures, taxation, restructuring, transaction expenses, impairment, and other non-recurring items[15] Use of Forward-Looking Statements The document contains forward-looking statements based on management's current beliefs and assumptions, which are subject to known and unknown risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are based on management's beliefs and assumptions, covering future results, business strategies, technology, financing, competitive position, and growth opportunities[16] - Involve known and unknown risks and uncertainties, including successful integration of recent acquisitions (Enfusion, Beacon, Bistro), ability to keep pace with technological change (including AI), competition, market volatility, and ability to manage growth and retain employees[17] - Readers are cautioned not to place undue reliance on these statements, and the company disclaims any obligation to update them[19] Consolidated Financial Statements The consolidated financial statements detail the company's balance sheet, operational performance, cash flows, and non-cash activities for the reporting periods Consolidated Balance Sheets The consolidated balance sheets present the company's financial position, showing significant increases in total assets and liabilities, primarily due to acquisitions, as of June 30, 2025, compared to December 31, 2024 | Item | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :--------------------------- | :----------------------------- | | Total Assets | $3,021,223 | $1,169,572 | | Total Liabilities | $1,033,253 | $139,341 | | Total Stockholders' Equity | $1,987,970 | $1,030,231 | | Cash and cash equivalents | $68,404 | $177,350 | | Intangible assets, net | $740,534 | $30,868 | | Goodwill | $1,267,261 | $70,971 | | Notes payable, less current maturities | $872,096 | $43,164 | Consolidated Statements of Operations The consolidated statements of operations show a substantial increase in revenue for both the three and six months ended June 30, 2025, compared to the prior year, but also reflect a net loss due to increased operating expenses, interest expense, and depreciation/amortization | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Revenue | $181,937 | $106,791 | $308,801 | $209,510 | | Gross profit | $118,514 | $76,901 | $211,454 | $151,441 | | Total operating expenses | $133,094 | $73,057 | $218,952 | $147,764 | | Income (loss) from operations | ($14,580) | $3,844 | ($7,498) | $3,677 | | Interest expense | $13,464 | $1,082 | $14,383 | $2,181 | | Net income (loss) | ($24,151) | $276 | ($17,215) | $2,511 | | Net income (loss) per share - Basic | ($0.09) | ($0.00) | ($0.07) | $0.01 | | Net income (loss) per share - Diluted | ($0.09) | ($0.00) | ($0.07) | $0.01 | | Total equity-based compensation expense | $37,548 | $24,858 | $61,260 | $49,083 | Consolidated Statements of Cash Flows The consolidated statements of cash flows indicate increased cash provided by operating activities, but significant cash used in investing activities, primarily due to business acquisitions, and substantial cash provided by financing activities from borrowings | Activity | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $47,081 | $43,870 | $71,581 | $53,963 | | Net cash used in investing activities | ($1,083,868) | ($41,874) | ($984,343) | ($53,729) | | Net cash provided by (used in) financing activities | $828,806 | ($1,507) | $801,557 | ($31,653) | | Cash and cash equivalents, end of period | $68,404 | $190,095 | $68,404 | $190,095 | | Acquisition of businesses, net of cash acquired | ($1,074,783) | ($40,121) | ($1,074,783) | ($40,121) | | Proceeds from borrowings, net | $926,634 | — | $924,475 | — | Non-Cash Investing and Financing Activities The company reported non-cash activities primarily related to the acquisition of Bistro intangible assets paid in common stock and business acquisition liabilities | Non-Cash Activity | Six Months Ended June 30, 2025 (in thousands) | | :---------------------------------------------------------------- | :-------------------------------------------- | | Acquisition of Bistro intangible assets paid in common stock | $102,729 | | Business acquisition liability included in accrued expenses and other liabilities | $3,122 | | Tax distributions payable to Continuing Equity Owners included in accrued expenses | $13 | Reconciliations of Non-GAAP Measures This section provides detailed reconciliations of GAAP financial measures to their non-GAAP counterparts, offering adjusted views of operational performance and cash generation Net Income (Loss) to Adjusted EBITDA Reconciliation This section reconciles the GAAP net income (loss) to Adjusted EBITDA, highlighting significant adjustments for non-cash expenses and non-recurring items, which resulted in a positive Adjusted EBITDA despite a GAAP net loss | Adjustment | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net income (loss) | ($24,151) | $276 | ($17,215) | $2,511 | | Interest expense | $13,464 | $1,082 | $14,383 | $2,181 | | Depreciation and amortization | $23,606 | $2,941 | $26,752 | $5,491 | | Equity-based compensation expense and related payroll taxes | $38,843 | $25,151 | $66,405 | $53,632 | | Transaction expenses | $10,433 | $875 | $17,713 | $1,678 | | Adjusted EBITDA | $58,312 | $33,448 | $103,382 | $65,650 | | Adjusted EBITDA Margin | 32% | 31% | 33% | 31% | Free Cash Flow Reconciliation The reconciliation shows the calculation of Free Cash Flow by deducting purchases of property, equipment, and software from net cash provided by operating activities, indicating a healthy cash generation capacity | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $47,081 | $43,870 | $71,581 | $53,963 | | Less: Purchases of property, equipment and software | $2,987 | $1,454 | $4,455 | $2,947 | | Free Cash Flow | $44,094 | $42,416 | $67,126 | $51,016 | Non-GAAP Operating and Net Income Reconciliations This section provides detailed reconciliations of various GAAP financial measures to their non-GAAP counterparts, adjusting for items like equity-based compensation, depreciation, amortization, and transaction expenses to present a clearer view of underlying operational performance | Metric | Q2 2025 (GAAP) | Q2 2025 (Non-GAAP) | Q2 2024 (GAAP) | Q2 2024 (Non-GAAP) | | :------------------------------------------ | :------------- | :----------------- | :------------- | :----------------- | | Gross profit | $118,514 | $140,789 | $76,901 | $82,713 | | Gross profit, as a percentage of revenue | 65% | 77% | 72% | 77% | | Cost of Revenue | $63,423 | $41,148 | $29,890 | $24,078 | | Cost of Revenue, as a percentage of revenue | 35% | 23% | 28% | 23% | | Research and development | $49,755 | $40,379 | $35,360 | $25,890 | | Sales and marketing | $39,221 | $23,991 | $15,169 | $12,242 | | General and administrative | $44,118 | $18,107 | $22,528 | $11,133 | | Income (loss) from operations | ($14,580) | $58,312 | $3,844 | $33,448 | | Income from operations, as a percentage of revenue | -8% | 32% | 4% | 31% | | Net income (loss) | ($24,151) | $34,795 | $276 | $26,827 | | Net income, as a percentage of revenue | -13% | 19% | 0% | 25% | | Net income per share - basic, non-GAAP | N/A | $0.13 | N/A | $0.12 | | Net income per share - diluted, non-GAAP | N/A | $0.12 | N/A | $0.10 |